Gear up for an IPO boom in the GCC

Dubai - Spotlight will remain on Aramco's IPO in 2018

The GCC is set to witness an unprecedented boom in initial public offerings (IPOs) in 2018 with the UAE and Saudi Arabia leading the way as nearly 30 companies are poised to go public, stock marekt analysts said.
The renewed interest for IPOs in the region is in the wake of a record 2017 that witnessed 17 issues raising as much as $2.95 billion in capital. The fourth quarter saw a total of eight IPOs in the GCC, representing a significant increase compared to the previous quarter, and raising a total proceeds of $2.5 billion, an increase of $2.3 billion compared to the third quarter's $234 million.
The Dubai Financial Market and Abu Dhabi Securities Exchange led GCC IPO activity in the fourth quarter in terms of proceeds, with two major offerings, raising $2.2 billion - which was 88 per cent of total GCC proceeds. The Tadawul was the largest in terms of IPO volume, witnessing IPOs of three real estate investments, whereas the Muscat Securities Market saw three IPOs that raised total proceeds of $82 million.
Steve Drake, head of PwC's Capital Markets and Accounting Advisory Services in the Middle East, said GCC IPO activity ended 2017 on a high, supported by government policies and improved market conditions. "Furthermore, we are seeing renewed appetite for cross-border IPOs and an increase in confidence from institutional investors in GCC equity markets."
Drake said the outlook for 2018 looks positive, with a strong diversified IPO pipeline subject of course to volatility arising from geopolitical factors. "The spotlight will remain on Aramco's IPO in 2018, which if it comes to market will be the largest global IPO ever."
Kuwait Financial House, or Markaz, said while stock markets are witnessing heightened volatility, there is good news in the form of renewed interest for IPOs in the GCC region. The GCC witnessed several interesting developments in February this year, it said.
"Saudi Arabia's cabinet has approved a new bankruptcy law, in an attempt to attract more foreign investments into the country and encourage SME growth. S&P affirmed its 'AA/A-1+' long-term and short-term foreign and local currency sovereign credit ratings for Kuwait. Nasdaq Dubai launched their first index based futures contracts, linked to the DFM's General Index and the ADX's main share index, the ADI. This is expected to help increase liquidity, attract international investments and provide a framework for hedging," said Markaz.
In 2017, the total number of GCC IPOs increased significantly to 28 offerings, compared to four in 2016, driven by increased listing activity on the Tadawul's Nomu parallel market, which welcomed nine IPOs together with the introduction of Reit listings, which also saw nine IPOs across the GCC.
Proceeds raised during 2017 were higher by $2.5 billion (322 per cent) compared to 2016, mainly due to the $1.3 billion IPO proceeds raised by Emaar Development and $850 million IPO proceeds raised by Adnoc (together 66 per cent of total GCC proceeds during 2017). The fourth quarter boom was felt across the globe with recording total proceeds of $63.5 billion from 370 issues, up 17 per cent in terms of proceeds and nine per cent lower in terms of the number of IPOs, compared to the fourth quarter of 2016.
In 2017, global IPO activity was robust with total proceeds 204.7 billion from 1,483 IPOs, outperforming the previous year in terms of number of IPOs and total proceeds by 47 per cent and 44 per cent, respectively, according to data from PwC.
- issacjohn@khaleejtimes.com